The Council of States, the upper house in the Swiss government, has voted to abolish the Imputed Rental Value tax. It is hoped that getting rid of the "unique" tax will make buying a house, owning property and accessing mortgages far easier.
Imputed Rental Value tax, or Eigenmietwert, is a law included in the taxes, costs and fees of owning a home. This is where the theoretical rent that you could charge annually by leasing your house is added on to your total income for the year and taxed as such. According to World Radio Switzerland, the law is unique to the country and is seen by many as the biggest hurdle to pass through before owning a house.
The government has been trying to reform the tax for decades, with several attempts failing to pass through because of the "knock-on" effect on other taxes. Now, a new plan to abolish the tax narrowly passed the upper house by 20 votes to 17, with nine abstentions. The change will cost the government around 1,6 billion Swiss francs a year in lost revenue.
As part of the changed law, the tax would be abolished alongside several other tax deductions, such as for maintenance work. The Council of States also discussed how tax deductions on mortgage interest payments would be affected, but no agreement was reached. The full law will still apply to second homes and homes used for holidays.
UBS, a major Swiss bank, reported in August that the abolition of the Imputed Rental Value tax would benefit most homebuyers, although the change may result in fewer maintenance projects on older properties because of the elimination of tax breaks.
The new law is due to be recalled to the National Council for further scrutiny before being sent for executive approval. UBS expects the changes to come into effect by 2023, although it is still unclear whether the law will be sent to referendum.